PE investments in retail real estate touch Rs 5,500 cr since 2015: JLL

Increased investments would boost supply of retail space and it is estimated that about 90 shopping malls would come into the market by 2022 at major cities, it added.

New Delhi: Private equity investments in retail real estate segment have touched around Rs 5,500 crore between 2015 – Q1 2018 on increased interest for superior quality shopping malls, according to property consultant JLL India.

"The Indian retail sector has attracted a cumulative of Rs 5,500 crore between 2015 and Q1 2018. Close to Rs 1,000 crore has been invested in the sector in Q1 2018 making it one of the best quarters for the sector in recent times," JLL said in the report Indian Retail: Stepping up the Game.

Private equity investments in retail properties stood at Rs 800 crore in 2015, Rs 3,000 crore in 2016 and Rs 700 crore last calendar year, the report said.

The steady increase in interest from private equity investment companies, has propelled developers of retail malls to re-evaluate their portfolio to include of 3 determining factors – Product, Catchment and Customer experience, which going forward would be the core of creating a successful retail space.

It is estimated that the future pipeline of 5 years (2018 – 22) will be 90 malls spread over 34 million square feet (mn sq ft). Of the expected new malls, 62% will be in the category of Superior Malls while only 10% will remain in the poor category. About 28% malls in the next five years will be considered average. Most existing malls will also align to these categories by going into redevelopment, redesigning or changing their tenant mix. Certain properties may also choose to opt out of business, putting the real estate to alternate use, the report said.

The report further estimates that vacancy would be inversely proportionate to the Grade / quality of the upcoming supply. While Superior grade malls are expected to see low vacancy of approximately 8%, average can expect to see vacancy levels of 17%. Poor grade malls will have vacancies touching 40% making them less business friendly for brands in the future.

JLL India CEO and Country Head Ramesh Nair said, "Some of the key factors determining the success of malls will be design, varied tenant mix, strength of catchment, infrastructure and amenities. But an increasingly influencing factor will be the mall's ability to counter shoppers' expectation for experience'."